Also known as:lump sums · lump-sum · lump-sum payment · lump sum settlement
Written by attorneys — see sources below.
A single payment of money made at one time rather than in installments. In tort actions the amount equals the present worth of the full future pecuniary loss. In probate proceedings the payment may satisfy a family allowance when the estate is inadequate to meet all claims.
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Common Examples
6
Tort Award for Future Wages
Lars Lindstrom suffers a permanent back injury in a car accident caused by Lotus Pharmaceuticals delivery truck. A jury finds future lost earnings of $800,000 spread over thirty years. The court reduces the award to its present worth and orders Lotus to pay that discounted figure in one check rather than monthly checks over the decades.
Probate Family Allowance
After Lucas Lee's death his surviving spouse Lillian Locke petitions the probate court for a family allowance. The estate holds only $40,000 after exempt property and homestead claims. The court awards a $20,000 lump-sum payment to Lillian for maintenance during administration instead of monthly installments.
Junior Mortgagee Rents Collected
Junior mortgagee Levi Lowe obtains a receiver who collects $50,000 in net rents from an office building before senior mortgagee Lakewood Manufacturing appoints its own receiver. The junior receiver retains the entire $50,000 lump sum for the benefit of Levi rather than turning the funds over to the senior receiver.
Workers Compensation Death Benefit
Luis Lopez dies from a work injury leaving a widow. State law provides that upon the widow's remarriage she receives a lump-sum payment equal to two years of benefits and periodic payments then cease. The insurer issues the two-year equivalent in one check to the widow.
Wengler v. Druggists Mutual Insurance Co.446 U.S. 142, 151, 100 S.Ct. 1540, 1546, 64 L.Ed.2d 107 (1980)
On February 11, 1977, Ruth Wengler, wife of appellant Paul J. Wengler, died in a work-related accident in the parking lot of her employer, appellee Dicus Prescription Drugs, Inc.
Her husband, appellant Paul J. Wengler, filed a claim for death benefits under Mo. Rev. Stat. § 287.240 (Supp. 1979). Under the statute a widower is not entitled to death benefits unless he either is mentally or physically incapacitated from wage earning or proves actual dependence on his wife’s earnings. In contrast, a widow qualifies for death benefits without having to prove actual dependence on her husband’s earnings.
Wengler stipulated that he was neither incapacitated nor dependent on his wife’s earnings. He argued that the statute’s disparate treatment of similarly situated widows and widowers violated the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. The claim was administratively denied. The Circuit Court of Madison County reversed, holding that § 287.240 violated the Equal Protection Clause because the statutory restriction on a widower’s recovery of death benefits did not also apply to a surviving wife. Dicus and its insurer, appellee Druggists Mutual Insurance Co., were ordered to pay death benefits to appellant in the appropriate amount.
The Missouri Supreme Court, distinguishing cases in this Court, reversed the Circuit Court’s decision. The equal protection challenge to § 287.240 failed because the substantive difference in the economic standing of working men and women justifies the advantage that the statute administratively gives to a widow. Because the decision of the Supreme Court of Missouri arguably conflicted with precedents, the Supreme Court of the United States noted probable jurisdiction. The Supreme Court reversed.
ERISA Pension Distribution
Leo Lynch's deceased spouse had participated in an ERISA plan that paid a $150,000 lump-sum distribution to the estate. The surviving spouse Lillian Locke claims the amount under ERISA's joint-and-survivor rules. The court treats the lump sum as an accrued benefit subject to the plan's distribution rules.
Boggs v. Boggs520 U.S. 833 (1997)
Isaac Boggs began working for South Central Bell in 1949 and remained employed until his retirement in 1985. He was married to Dorothy Boggs from 1949 until her death in 1979, and the couple had three sons. After Dorothy died, Isaac married Sandra Boggs in 1980, and they remained married until Isaac's death in 1989.
Upon retirement, Isaac received a lump-sum distribution of $151,628.94 from the Bell System Savings Plan, which he rolled over into an Individual Retirement Account worth $180,778.05 at his death. He also received 96 shares of AT&T stock from the Bell South Employee Stock Ownership Plan and a monthly annuity of $1,777.67 from the Bell South Service Retirement Program. Dorothy's will bequeathed one-third of her estate to Isaac outright along with a lifetime usufruct in the remaining two-thirds, with naked ownership passing to the sons. A 1980 Louisiana judgment of possession ascribed to Dorothy's estate a community property interest in Isaac's Savings Plan account valued at $21,194.29.
After Isaac's death, Sandra began receiving a survivor annuity and other benefits. The sons filed suit in Louisiana state court claiming a portion of the retirement benefits under Dorothy's will and Louisiana community property law. Sandra then filed a declaratory judgment action in the United States District Court for the Eastern District of Louisiana asserting that ERISA preempts the sons' claims. The District Court granted summary judgment against Sandra. The Fifth Circuit affirmed. The Supreme Court granted certiorari.
Social Security Old-Age Payment
Loyal Insurance employee Lars Lindstrom reaches retirement age under the Social Security Act. The government calculates his monthly pension but also issues a small lump-sum payment representing the relatively few cases where a one-time benefit is due instead of ongoing monthly amounts.
Helvering v. Davis301 U.S. 619 (1937)
The Social Security Act was enacted on August 14, 1935. Title VIII of the Act imposes an income tax on employees measured by wages paid during the calendar year and an excise tax on employers with respect to having individuals in their employ, also measured by wages. Both taxes start at one percent for 1937 to 1939 and increase by one-half of one percent every three years thereafter up to three percent. It exempts agricultural labor, domestic service, government service, and persons over age 65. Wages in excess of $3,000 per year are excluded from the computation.
Title II of the Act creates an Old-Age Reserve Account in the Treasury and authorizes annual appropriations to it beginning with the fiscal year ending June 30, 1937. The amount is determined on a reserve basis using actuarial principles and a three percent interest rate. It provides for monthly pensions beginning in 1942 to persons who have attained age 65, worked at least one day in each of five separate years since December 31, 1936, earned at least $2,000 since that date, and are not receiving wages from regular employment. Benefits do not exceed $85 per month and are measured by a percentage of wages that decreases as wages increase, as well as certain lump sum payments in specified contingencies.
A shareholder of the Edison Electric Illuminating Company of Boston brought suit in the United States District Court for the District of Massachusetts to enjoin the corporation from making the payments and deductions required by the Act. The bill alleged that the corporation had decided to obey the statute despite the shareholder's protests. Compliance would cause employee unrest, demands for increased wages, and irreparable loss to the corporation and its shareholders from which recovery would be impossible as a practical matter.
The corporation appeared and answered without raising any issue of fact. The United States Commissioner of Internal Revenue and the United States Collector for the District of Massachusetts intervened as defendants. The District Court held that the tax upon employees was not properly at issue and that the tax upon employers was constitutional. It denied the injunction and dismissed the bill. The Circuit Court of Appeals for the First Circuit reversed the decree.
The intervening defendants petitioned for a writ of certiorari. The petition presented two questions: whether the tax imposed upon employers by section 804 is within the power of Congress under the Constitution, and whether the validity of the tax imposed upon employees by section 801 is properly in issue and if so whether that tax is within the power of Congress under the Constitution. The Supreme Court granted certiorari.
6 common questions
Students Frequently Ask...
How is a lump-sum tort award for future losses calculated?
The award equals the present worth of the full amount the plaintiff would have received at the later time. Courts discount the future stream to its value today before entering judgment.
When may a probate court pay a family allowance in a lump sum?
The court may pay the allowance in a lump sum or periodic installments when the estate is inadequate to discharge allowed claims. The payment goes first to the surviving spouse for the use of the spouse and minor or dependent children.
Does a junior mortgagee keep rents collected before a senior receiver is appointed?
Yes. The junior receiver retains the net rents collected before the senior receiver takes possession. Those funds belong to the junior mortgagee even though the senior mortgagee later obtains possession.
What happens to periodic death benefits when a widow remarries?
The widow receives a lump-sum payment equal to two years of benefits. Periodic payments then cease unless other total dependents remain entitled to benefits.
How does ERISA treat a lump-sum pension distribution upon a participant's death?
The lump sum counts as an accrued benefit. The surviving spouse may claim it under the plan's joint-and-survivor annuity rules unless a valid waiver occurred.
Why does the Social Security Act provide some lump-sum old-age payments?
The statute authorizes monthly pensions as the primary benefit. A smaller category of lump-sum payments covers the relatively few cases where a one-time distribution is appropriate instead of ongoing monthly amounts.
from the Department. 553 F. 2d, at 592. Indeed, the Department itself contemplated that the money for the award would come from city revenues, Pet. for Cert. 30-31, with the Department…
payment
equal in amount to the benefits due for a period of two years shall be paid to the widow or widower. Thereupon the periodic death benefits shall cease unless there are other total…
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